Eureka Forbes: Responding to Changing Market Dynamics
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Case Code: BSTR467 Case Length: 15 Pages Period: 2011 - 2013 Pub Date: 2014 Teaching Note: Not Available |
Price: Rs.400 Organization: Eureka Forbes Industry: Water Purifiers Countries: India Themes: Market Agility |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
Entering the Water Purifier Segment
Eureka Forbes, which launched its Aquaguard range of water purifiers in 1984, was credited with inventing the category of water purifiers and creating the brand ‘Aquaguard' that went on to become a generic name for purifiers.
While Eureka Forbes was a pioneer in bringing the concept of water purifiers into the Indian market, it also had to deal with the challenge of explaining the water purification technology to the Indian consumers who, till then, had followed only the traditional methods of boiling and filtering water. In the 1980s, most of the consumers in India used chlorine-based water purifiers. Eureka Forbes was a pioneer in launching UV-based purifiers (Refer to Exhibit II for evolution of water purifiers). Initially, many consumers did not understand what the water purifier could deliver. Thus, Eureka Forbes was faced with the Herculean task of breaking down resistance while generating awareness for itself...
The Water Wars
For several years, Aquaguard enjoyed a monopoly in the water purifier market. However, it started facing competition when Hindustan Unilever Limited (HUL) launched Pureit in 2008. Eureka Forbes' water purifiers were expensive, priced at Rs. 7,000 or more. This put them out of the reach of many Indians. This gap was exploited by HUL, which priced Pureit at a much more affordable Rs. 2,000. It had taken HUL more than a decade to exploit new ways of operating to address the critical water needs of the bottom-of-the-pyramid consumers. The low price of Pureit was considered as a breakthrough innovation by many industry experts as it made the purifier affordable to millions of Indians lacking access to potable water....
Defending the Market Leadership Position
In 2008, Eureka Forbes set up new alternative retail channels in a bid to increase the penetration of its water purification devices. The company's retail division extended its products to chemists and general merchandise stores.
Eureka Forbes realized that the direct selling model was not economical in smaller markets. Hence, it started a franchising model in those markets and created franchised direct selling agents. Subsequently, in 2013, Eureka Forbes stated that it would aggressively adopt the retail marketing route since most of its competitors sold their water purifiers through retail outlets. According to Shroff, "Nowadays both husband and wife are working, so there is no one at home and therefore the direct sales force is unable to reach a large segment of people." He also stated that with the increasing competition, the company could no longer ignore the retail channel. Though Eureka Forbes had tested the retail channel some years earlier, it maintained that it would sell only select entry-level products through the route...
The Results
To some extent, the digital initiatives had converted into sales for the company. In 2012, the company's online sales grew from US$10,000 to US$50,000 a month. The Facebook leads also lowered the company's advertising costs. However, according to Singh, "As of now, online sales - actually using a credit card online to make the purchase – are less than 1% of sales." Going forward, Goklaney expected the Internet to be a primary driver of sales in the international market. The company through its several initiatives and new product offerings was able to retain its market leadership in the water purifier market in India. For the FY 2013, the company recorded a 53 percent share in the water purifier market....
Looking Ahead
Despite the various challenges and competition Eureka Forbes faced, Goklaney was confident that the company was on the right track. But analysts felt that Eureka Forbes needed to take drastic steps to take on the competition.
The company had plans to enter new segments such as air purifiers, fire extinguishers, and security systems as an alternate strategy – markets that were still fairly niche and where the company did not have a first mover advantage. The air purifier market in India was estimated to be valued at US$ 12.65 million in 2013, while the fire and safety equipment market was estimated to be about US$ 3.16 billion in 2013, according to research firm TechSci Research. 27 Some analysts felt that Eureka Forbes would be able to retain its market share since the Indian water purifier market was expected to grow 229 percent, up from Rs. 18.64 billion in 2012 to Rs. 61 billion in 2017,....
Exhibits
Exhibit I: Financials of Eureka Forbes (in Rs. billion)
Exhibit II: Evolution of Water Purifiers
Exhibit III: A Brief Note on RO and UV Water Purifiers
Exhibit IV: Water Map Created by Eureka Forbes
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